Oct 9, 2017 | Emerging Markets, European Economy
Rate differentials are a key driver of FX moves, and we look at rate differentials by adjusting for the effects of both inflation and embedded risk in the market. We do this by looking at 2y nominal-rate differentials, adjusted for CPI and then divided by the implied...
Sep 29, 2017 | European Economy
With a synchronised recovery in economic activity underway, memories of the 2015-2016 deflation shock fading and a slew of benign election results (Dutch, French and German), confidence in the euro area has improved markedly since the beginning of the year and has...
Aug 13, 2017 | European Economy
Convergence in core-periphery sovereign credit spreads since 2012 would seem to vindicate the raft of monetary easing measures deployed by the ECB to stabilise the eurozone. This is only half the story, and the other half is decidedly negative. The eurozone collapse...
Jun 30, 2017 | European Economy
The DAX index is near all-time highs, and German stocks are rallying in line with other European markets. While the economic news has been good, our leading indicators for Germany are much less rosy than we would expect given stock prices. There is a big divergence,...
Jun 16, 2017 | European Economy
Macro headwinds are building up for long EURUSD positions in addition to signs that EURUSD is becoming very overbought technically. A few weeks ago we noted that EURUSD sentiment was one of the most bullish (contrarian indicator) among the 50 major FX pairs we track....
Feb 24, 2017 | European Economy
(from our Weekly Update of 14th February 2017) Rising inflation in the eurozone is driving real rates lower, widening the rate differential between the EUR and other DM currencies. We look at risk-adjusted real-rate differentials by dividing real-rate differentials by...
Nov 4, 2016 | European Economy
(from our Tactical of 18th October 2016) One currency that may buck the trend and remain supported against the dollar is the euro. Although tapering from the ECB does not look imminent, core inflation may start surprising to the upside in the eurozone. The chart...
Sep 30, 2016 | European Economy
(from our Tactical of 13th September) Drivers of the euro are showing support. When the ECB in March of this year shifted its emphasis from the rate channel to the credit channel for the transmission of monetary policy, this took a weight off the euro. Since that...
Jul 22, 2016 | European Economy
While most of the attention post-Brexit has been on the UK, we are far more concerned about Europe. Markets and the economy operate in a feedback loop, and the performance of European banks relative to the stock market points to a fall in lending ahead in Europe. ...
